Use of cereal ‘rights’ angers farm partners

Date: 23/07/1998

By Myles Neligan

THE European Commission's allegedly loose interpretation of World Trade Organisation rules governing the use of export subsidies for cereals and other agricultural products is causing renewed tension between the EU and its major farm trade partners.

US agriculture officials fear that the Commission may attempt to relieve growing pressure on the Union's cereals market by disregarding the WTO ceiling on the volume of subsidised grain exports for 1998, claiming that shortfalls in previous years justify exceeding the limit.

The EU has carried over unused portions of its annual WTO quotas for subsidised cereal exports every year since 1995, accumulating 35 million tonnes in unused 'subsidy rights'.

But the US, with the support of Australia and New Zealand, argues that subsidised export allowances may not be brought forward in this way, and says that any attempt to take advantage of accumulated subsidy rights would be a breach of WTO rules.

"We believe that this practice breaches the Uruguay Round agreements, and we would take a very serious view if the Union were ever to exceed its permitted volume of subsidised exports," said a US agriculture official.

The issue has become highly sensitive after US wheat prices fell below the psychological barrier of 90 ecu per tonne last month, a development which American traders blame on pressure from subsidised EU exports. This has aggravated EU-US tensions, already running high after a bitter dispute over a 30,000-tonne shipment of subsidised Finnish barley to the US in May.

Concern amongst the Union's grain exporting rivals has been growing since last month when the first production forecasts of the year predicted a bumper EU cereal harvest of more than 200 million tonnes.

But the Commission has moved swiftly to placate its critics. "We defend our right to carry over unused portions of our subsidised export quotas, but we will not use them without careful consideration of the likely impact on world markets," said a spokesman for Agriculture Commissioner Franz Fischler.